Quaker Chemical Co. has been an international business for decades, but it didn’t truly go global until six years ago.
As its customers began to push across international borders, Chairman and CEO Ronald Naples knew it was time for the Conshohocken-based business to change the way it looks at the world.
“Companies have been international for a long time,” Naples says. “These companies operated all around the world, but they operated as if they are units all over the world. Quaker was the same way.”
Quaker’s offshore offices had matching logos and sold the same products, but this uniformity didn’t cover its disparate systems. For example, it separated its European and U.S. income statements, its regional offices collected and stored information in different ways and managers measured progress for regional businesses. Quaker’s worldwide offices were linked but not integrated.
“The crux of being a global organization is not a matter of being everywhere but in operating as if you are in one place,” Naples says.
To do this, Quaker needed to connect its regional operations by unifying its systems, reorganizing its management structure and changing the way customers thought about its products.
“That’s a tall order,” Naples says. “As you look at the world, you have to ask yourself, ‘Can you afford to look at your company as discreet businesses alone, or do you need to look at it as a global whole?’”
The answer was simple.
“The how is always more difficult than the what,” Naples says, adding that he prefers to think of the company’s global strategy and the destination statement he wrote — “To deliver everywhere the best from anywhere” — as his way of leading the company toward progress, not change.
In fact, Naples is sensitive about not calling Quaker’s global strategy change management.
“I like to talk about progress management,” he says, “And we think (our global strategy) is a way we can deliver value to our shareholders while we recognize the reality of the world we operate in and what we need to do strategically to remain strong as our customers change, shift, consolidate and become more global themselves.”
Selling knowledge
Quaker’s customers are largely industrial businesses, steel and metalwork manufacturers that produce consumer durables such as cars. More than half are based outside of the United States, and all of them purchase specialty chemical products that Quaker develops, produces and distributes at its worldwide facilities.
Customers purchase a product, which is a solution to a specific problem. But Naples realized that Quaker’s real asset is knowledge. Take the steel industry, for example.
“Our market share in steel is such that we have been inside every steel mill in the world,” he says. “That means we know more than anyone else, and our organizational challenge is to turn what we know into a competitive advantage — a competitive advantage everywhere.”
So Naples considered why customers depend on Quaker and divided the answer into three areas: product technology, process knowledge and application know-how.
“As we looked at them more, we realized that building the business regionally and basing business on disaggregating our assets wasn’t the best thing for us,” Naples says.
Quaker’s asset — knowledge — was dispersed among its geographic locations rather than cultivated and sold as its No. 1 product.
“If the customer sees us as a provider of a customized lubricant, that is one thing,” Naples says. “But that is not what we want to be. We want them to understand this lubricant is only the vehicle for what we have to offer special value to them. We were shifting what customers think we can do for them.”
To measure the value of an intangible product such as knowledge and leverage this asset on a global basis, Quaker needed a structural makeover. Naples could not show customers that what Quaker knows about steel in Japan applies to the automobile industry in Detroit until systems were integrated. To do this, he needed a revised technology platform, management structure and communication tools, along with employee buy-in.
So in 1999, Naples pulled the rug out from under the old international set-up and built the foundation for the $400-million global business that Quaker is today.
The global movement
Naples talks about the power of the common purpose, an ideal he learned as a U.S. Army Ranger that also applies to the corporate world.
“One of the toughest things that managers and leaders in a company have to do is help people understand the common cause,” he says
So Naples confronted every aspect of how Quaker collected, shared, marketed, researched and sold its knowledge. Employees bought into the plan, he says, because they understood why it was critical to the company’s future success.
“Our folks identified with the changed world and shared a willingness to respond to it by adopting new practices, doing business in a different way and reporting to new people,” Naples says.
Employees viewed Quaker’s globalization efforts differently, depending on their roles in the organization.
“If a production employee works in a plant in Holland, the fact that we have a plant in the U.S. doesn’t affect his life,” Naples says. “But globalization changed the life of a production manager in a plant who could measure how he is doing versus another plant.”
Connecting these worldwide operations introduced myriad accountability issues.
“Someone may have worked in a European organization and understood his or her impact on the business,” Naples says. “Now, all of a sudden, one’s impact was more remote. What someone did in Holland may affect what someone did in the U.S., but it was harder to feel the impact of that, so they felt removed from the results of their actions.”
Naples fine-tuned communication tools to ensure that employees realized their critical role in the company’s processes.
“The one safe assumption you can make about any company is no matter how much you communicate, it is never enough,” Naples says. “We now focus more closely on how we communicate, who is communicating and what they are communicating.”
Global managers travel more often, meet employees more regularly and address the company’s strategic goals so each of Quaker’s 1,200 employees understands why their world quickly got a lot bigger. E-mail plays a key role in delivering daily company updates, and time zone differences are less troublesome when communicating this way as opposed to by telephone, Naples says.
The second piece of globalizing personnel was to centralize leaders in corporate headquarters. Rather than having regional leaders with regional resources such as research and development, marketing and technology, Naples collected these divisions and created global units.
But similar accountability and management oversight issues surfaced.
“There is the whole expression to think globally but act locally,” he says. “As you move toward a global organization, those things really become more real to you. We were trying to do as much globally as possible and we thought that was the way to focus on knowledge and value, the two things we felt were most important. Much of what we did was still locally executed, but it was all directed from central business unit management.”
He says Quaker never ignored the importance of thinking locally, but at first, its focus on worldwide integration went a bit too far. In 2005, Naples concentrated on pushing certain decision-making and execution responsibilities back to regional management, while Quaker maintained its global product management, key account management and R&D.
“That way, we can look at what resources we have in local markets and see how we can reallocate these resources,” Naples says.
Accountability for financial results now lies in the hands of local managers. This allows regional operations to understand their costs and evaluate their contributions to Quaker’s bottom line.
As part of the integration, technology also had to be upgraded. Legacy software suited Quaker’s regionally fragmented business model, but the information collected and stored in these systems wouldn’t function well in a global organization.
“You have to collect information the same way,” Naples says. “Information has to mean the same thing to managers [in different countries.] We had to get rid of legacy systems that caused us to have different views on how the business was doing around the world.”
Quaker needed to measure and allocate its resources, and the way to do that was to upgrade to an integrated system.
“We needed to make sure we were aligned with a world that worked through the World Wide Web,” Naples says. “And if you have systems that aren’t modern, that will give you problems.”
The five-year process of installing an enterprise management system eventually allowed Quaker to operate on a single technology platform — the foundation for its global strategy.
“Knowledge goes into a system that allows us to share and use knowledge around the world,” Naples says.
Now, Quaker must manage the learning side of the equation.
“We know what we know technology- and product-wise, but because we have people calling on customers every day, our people learn every day,” Naples says. “They learn about a problem a customer has and how to solve it. We don’t want that learning to reside with one person.”
An online sharing tool allows employees to input information they learn in the field. These nuggets are indexed so others can access them through the global technology platform.
“In the past, someone may have sent out an e-mail asking, ‘Who knows about this problem on rolled steel?’” Naples says. “Before, an e-mail would have gone out and (getting a response) was always hit or miss.”
Quaker’s sharing tool eliminates time as a hindrance to getting information. Rather than hoping that a co-worker will see, read and respond to an e-mail inquiry, the employee can access the global knowledge index and even compare field information and findings from China or Brazil.
Technology allowed for improved customer service by indexing knowledge and accessing vital information from anywhere in the world.
Customer service functions such as call centers for marketing and sales stayed local despite global initiatives. But customer management in terms of identifying products and technology to suit each customer is a different story.
“Car companies in Detroit operate in China and Brazil — all over the world,” Naples says. “It shouldn’t matter if our customer is in Detroit and China; we operate as if that customer were one.”
Now, Quaker employees can leverage what they know about steel production in the United States and what they know about the industry in China. Technology and integrated systems allow them to access pricing, marketing, sales and product information from facilities around the world, making Quaker a more valuable partner to its customers, Naples says.
Maintaining the mission
Following through with Quaker’s mission to “deliver everywhere” is a job that’s never done. Naples constantly considers how the company can reallocate its regional resources, leverage global knowledge and strike a balance between local and global execution.
He can tweak and modify these variables, but he can’t control climbing crude oil prices or reverse changes in customers’ markets. He can, however, maintain a diverse customer base to guard the business during tough times.
“We have a good portfolio in terms of the kinds of manufacturers we serve, and this usually works to our advantage,” he says. “A piece of business may be down and another may be up, and the combined result is OK.”
Operations in China and Brazil thrive, capturing new business for the company. And despite economic challenges, the automobile industry is steady.
“We are trying to build our business with the manufacturers that are growing, as well as continue to serve key American manufacturers who are very important customers to us,” Naples says.
Quaker’s global platform will allow it to penetrate this customer base by offering, for example, chemical management services, a promising business segment. Today’s customers demand Quaker’s chemical knowledge, not just its products.
“Leaders need to deal with the way things are as they find them, not as they wish they were,” he says. “On the other hand, in moving forward, you need to think about what you wish the organization could be. Then you will find the guide to the right destination.”
How to reach: Quaker Chemical Co., http://www.quakerchem.com or (610) 832-4000
