A 36-inch mainline pipe in Greenville County, S.C,. ruptured just before midnight on June 26, 1996, leaking nearly 1 million gallons of diesel fuel into the Reedy River. The event marked the low point in Colonial Pipeline Co.’s 44-year history.
“The Reedy River spill was a bit of a wake-up call for us, the board of directors,” says David L. Lemmon, president and CEO of the company at the time. “I had been through a similar transition at Amoco. The old oil (industry) mentality was, ‘I’ll compromise on the courthouse steps.’ We changed that mentality at Amoco in the ’70s and ’80s, but it hadn’t changed at Colonial. They just could not get ahead of the curve.”
Lemmon took the president and CEO spots in 1997 at a time when the company, which every day delivers an average of 95 million gallons of gasoline, kerosene, home heating oil and diesel fuel to shipper terminals in 12 states and the District of Columbia, was still reeling from the impact of the spill.
“We were under investigation by the main Justice Department of the United States in Washington, D.C., for seven years — five of them on my tenure,” Lemmon says. “When you have FBI agents snooping around, it creates a high sense of urgency.”
It was that sense of urgency Lemmon wanted the rest of his company to share.
“When I came here, I really had to make an impact that Colonial had to change,” Lemmon says. “It operates in the public venue, across private property. We’re a bit of a franchisee of the public, and if we don’t change, we’ll go out of business.
“What I was trying to do initially was create a sense of urgency that we had to stop spills. Zero was the only thing acceptable. There was a lot of belief that was not doable here at Colonial. That was the mountain. I made safety my mantra, my call to action.”
That mantra began with that sense of urgency. But to turn around Colonial Pipeline, which Lemmon says may have been just one spill away from federalization, he had to change the culture. To do that, the new CEO also had to make wholesale changes in talent and develop the strategy and vision that would take the company forward.
Changing attitudes
Lemmon knew a dangerous attitude persisted at Colonial Pipeline. He knew the old oil mentality needed to change, and that was unlikely to happen just because a new CEO insisted it should.
“There were some attitudes here that said, ‘We could wait out this new CEO, just like we waited out the other one,’” Lemmon says.
To develop the sense of urgency he felt the company needed, Lemmon made drastic changes throughout the organization. And he began near the top.
“I needed to get some new talent in here,” he says. “I knew before I came that I needed a new chief operating officer. My first task was to go out and look for a COO that had been through a similar transition that I had at Amoco. I called (the person in that position) my mountain mover, somebody who could really employ and drive, even at the risk of leaving a little debris along the road. (He could) drive a new safety, accountability and operation excellence policy.”
Lemmon hired Bill Scott, a 24-year veteran of Conoco, as the first step in changing the culture of the company. But that was only the beginning. Early on, Lemmon recognized that most of the employees had become complacent. He wanted to change the entitlement attitude that pervaded the company, and to do that he need a human resources expert.
“I quickly realized that the previous administration had blown away the people processes,” he says. “I went from CEO to COO, until I got that replaced. Then I became vice president of human resources for a few months. I quickly could see that having a former operations manager in the human resources role would have to change.”
He found what he needed in Rhonda Brandon, who helped him map out a strategy for changing the culture through processes and recruiting.
For example, at one time, when a position opened up, only internal candidates were considered. With Brandon’s help, Lemmon changed the policy so that outside candidates could be considered.
“That brought a lot of acrimony and a lot of frustration in the organization,” Lemmon says. “The first year, when we had an opening, we would look at our internal candidates, but we would go outside as well. If we could find a better candidate outside, we’d bring them in. It took a couple of years to get over that. Later in the ’98-’99 timeframe, (I realized) it was too slow. I had to wholesale go in and redesign departments.”
Thus began a restructuring of nearly every department in the company.
“Engineering was the first department I went through, and it really resounded,” he says.
Lemmon fired half of the 42 people in that department.
“Then I went through my financial department and a whole series of other departments. They were not as broken and did not need to go to the same level. When I got to the environmental department, I didn’t let anybody go. They got the message.
“Waiting for one opening was too slow to change the culture and to get the talent that I needed. The talent here had not developed. They were good people; they just hadn’t developed because they were so staid in their approach to business. I’m not sure I went fast enough in that regard. I wanted to be fair to the people as I went (forward), and I wanted to treat them with dignity, but they had to perform. And if they couldn’t perform, they had to leave.”
Strategy and vision
With the right sense of urgency and the people who could move the company forward in place, Lemmon focused on a plan for the future.
“My third step was developing a strategy and a vision,” Lemmon says. “Frankly, I did it out of sequence. I could not wait for the vision. I wanted to get on with the strategy. I did the strategy first, then turned around and redid my vision and tacked it on the front of it. Traditionally you go the other way.”
“In 1999, I spent nine months developing the 10-year strategy for Colonial. I had a board advisory committee I set up. I involved 50 or 60 people most of the leaders of Colonial. Once you’ve got that strategy, you need to take annual bites of that strategy and you need to financialize those in your budgeting process.
“The first year of my 10-year strategy, I managed as hard as I can to make sure that budget delivers that strategic goal,” Lemmon says. “One of the things I pride myself on is across the years, we’re pretty close — almost every year — to those strategic targets. They’ve changed a little bit; we’ve had some upsets, and we’ve had some windfalls. If you look at the curve over that (timeframe), it fits pretty closely to that strategy.”
He reviewed progress with the board each December.
“From that budget, I put together corporate goals,” he says. “Corporate goals are a few goals — three to five — big-ticket goals that I review and ask the board. Those goals, and how we measure up against those goals, determine the incentive compensation bonus for the 25 top managers. It also has the variable pay program — we call it win-share. It also ties very closely to how we reward our employees for their overall performance.”
At one time, all employees received the same bonus regardless of performance. That was another thing Lemmon changed.
Once the strategy and vision were developed, he delivered it to the rest of the company.
“(It took) massive communications,” he says. “The previous administration would go on tours of the field, but they’d go look at pipes and tanks and stuff like that. I wanted to go meet people. I told every one of my leadership team members, ‘We’re going to the field. We’re going to sit down and talk with people.’”
But Lemmon didn’t just dictate the strategy. He wanted employees involved in the process.
“I’ve learned, when you go talk to people, if you just tell them what you think, you don’t make near the impact as if you ask them what they think,” he says. “When I go to the field, I go with a blank flip chart. I say, ‘Guys, what do you want to talk about? What’s on your mind? What are your issues?’ And I’ll list them. They’re a little reticent, but pretty soon we’ve got 10 or 12 issues on that sheet of paper that we want to talk about. Then I start down (the list).
“When I get to the bottom of the list, I’ve talked about everything I wanted to talk about, but they think I’ve talked about everything they wanted to talk about. I’ve trained my leadership team to do that, and our employees love it.”
Lemmon says it was a slow process to completely change the culture.
“As late as five or six years into it, I would find managers — they hadn’t deceived me, but they hadn’t come clean with me,” he says. “They weren’t backbiting, but they were reticent to change. I’d confront them, and if they couldn’t get on the bus, they had to change or go.”
The goal now is to make sure the company never loses that sense of urgency.
“We’ve asked ourselves that question repeatedly,” Lemmon says. “Are we falling into the very complacency that we were trying to pull out of? We have worked on it hard. We start again with our strategy. We’ve freshened our strategy every other year since we’ve been here. Last year, we completely redid our strategy.
“We took a look at our mission and vision. We’ve tweaked those and tried to put more personal accountability into our overall performance. Every other year, we have a company meeting. We go offsite. We bring in high-powered motivational speakers and we bring in people that critique us. We try to keep this sense of urgency.
“The fact is, we’re only one spill away from being bad guys. Therefore, we’re not going to have them.”
Lemmon is now officially a retiree of the company after eight years of service, although his tenure with new president and CEO Norm J. Szydlowski overlaps for several months.
“I leave this company in good hands, with a good future and with a strategy to grow based on stellar performance,” he says of the $713.7 million company.
And the result of his work is clearly evident.
“Partners will not deal with you; government agencies will not give you rightaway if you’ve got a poor reputation,” Lemmon says. “By changing the reputation and credibility of Colonial in the last three or four years, we’ve now been able to grow. We’ve focused a lot on pipelines — extension of pipelines, buying new pipelines — going to new markets. We’ve achieved some of those, we’re not near as far along on those as we are in the other. But we must do both – we must keep the oil in the pipe and find new ways to grow.”
HOW TO REACH: Colonial Pipeline Co., (678) 762-2200 or www.colpipe.com
