Improving Shareholder Equity by Matching Temperament to Task — A Case Study at Dow Chemical
by Greg Stevens, President, WinOvations, Inc. (gstevens@winovations.com); James Burley, Professor of Marketing, Central Michigan University, and Kurt Swogger, Vice President, Polyolefins and Elastomers R&D, The Dow Chemical Co.
In this case history we show how matching personality type to job function dramatically improved New Product Development results in one division of Dow Chemical over a 10-year period.
The Challenge
In 1991, Dow Chemical was considering selling or joint-venturing its Polyolefins and Elastomers (PO&E) business. The products produced by this business including plastic items such as grocery bags, shrink wrap, milk jugs and other containers, were becoming increasingly commoditized earlier technological advantages were being lost and profitability was steadily declining.
Dow's PO&E business had not created a single new product line in several years prior to 1991, and it was believed that "there was nothing new under the sun." The very culture of the R&D organization itself seemed lacking in creativity. Indeed, it looked like "the sun was setting" on the PO&E business at Dow.
Taking up the challenge
This was the challenge that Kurt Swogger inherited in 1991, when he became head of R&D for Polyolefins and Elastomers. In a remarkable turn around that took less than 10 years, Swogger and his management team were able to transform the division from a commodity producing entity being considered for divestiture, into a thriving, creative group which now represents a significant proportion of the shareholder equity of The Dow Chemical Co. By 2003, more than $3 billion in value had been created from this one research group's efforts, in large part due to getting the right person in the right job.
How Was The Innovation-Transformation Achieved?
To build a more innovative and agile culture, Dow's Polyolefin's & Elastomers R&D group instituted a number of unique procedures and approaches which led to the rapid formation of a more creative and effective culture. One key aspect of PO&E management's approach to improving R&D's organizational effectiveness was by matching individual personalities to the job function needing to be performed. The aim was to match people and their personalities with job they did best.
Two types of personality
The approach was influenced by the work conducted over an earlier 10-year time span in a different division of Dow, which had revealed that certain types of personalities involved in the early stages of New Product Development regularly out-earned other types. These types were referred to as Starters/Innovators. These out earned other types by a factor of 95 times - a 9,500-percent improvement - when measuring corporate profits that later resulted from their early-stage New Product Development analyses.
The Starter personality types are those who are creative, intuitive, curious and visionary. These individuals continuously challenge the status quo by asking "Why not?" They are risk takers, and often are hard to manage.
The other type of personality identified were the Finishers. These types are detail minded, practical, respectful of authority and rules, well focused and task oriented. These are the people who "get the job done."
In terms of Keirsey Temperament Theory, "Starters" are the Rational Architects (INTPs) and Inventors (ENTPs)' and the Finishers for the most part are Guardians (SJs).
Steps to implement
First it had to be determined which personalities were needed to do which jobs. Upon reflection, it became evident to management that Starter job roles included determining what new polymers are needed to meet customers' needs, and then creating them. This required breakthrough thinking and broad, multidisciplinary experiences. Finisher job roles included developing and commercializing these products, keeping plants running well, and implementing procedures as required, to make money. A group such as PO&E R&D needed both types of personalities.
With that understanding, management first set out to identify the Starters/Innovators and Finishers/ Implementers throughout the organization through both intuitive and qualitative means.
The match-up
When new R&D management initially took over in 1991, the right person was in the right job only 29% of the time (i.e. Most Starters were in Finisher job roles, and vice versa). Management was able to determine this through observation and judgment and began a shift to move individuals into more appropriate job roles.
Management watched closely to determine whether the job changes were working. Usually mismatches could be identified within six months or less. For example, if an individual was having great difficulty in a Starter role, they were reassigned quickly to a Finisher role, and vice-versa. In short, there was some trial and error involved, but by 2001, the right person was in the right job role 93% of the time.
Scarcity of starters
The scarcest types of people to find were the Starters. [According to Keirsey, Starters make up about 4 to 5% of the population at large, while Finishers represent 50%.] Management wanted more Starters to increase the number of differentiated new products. They sought out creative scientists and managers, or "mavericks" to fulfill these functions. These people were typically found in other parts of The Dow Chemical Company's organization, where they were often out-of-favor and frustrated because they did not fit the cultures of those divisions, and were often perceived as "difficult to manage." These individuals would quickly find a home in Polyolefins R&D if they were creative and intelligent types, who were really trying to make positive changes for the company, rather than just being challenging trouble-makers.
Due to their scarcity, and the critical role they play in creating tomorrow's new business, Management made sure to reward these the Starters well in their new roles.
Raising the Creativity of the R&D Group's Culture
Another key aspect of PO&E R&D management's approach to improving R&D's organizational effectiveness was to try to quickly increase the creativity of the key decision makers in the research group, in both scientific and managerial roles.
When new R&D management initially took over in 1991, the research group's culture was well below the national average for creativity. In 1991, the group culture was that of an "SJ-Guardian" group - akin to the culture of bank tellers. By quickly bringing in more creative scientists and managers starting in 1993, after just two years the group's culture was already transformed to that of a much more creative "NT-Rational" culture, and this trend continued through 2001.
The rapid boost in group-creativity has led to a remarkable outburst of innovation coupled with the creation of extraordinary value. This research group is also now defined by external auditors as "best in class" in the chemical industry for speed-to-market, and is much faster on average than its parent company.
Evaluating the changes
The positive results of this ten-year transformation were striking. In total, the personalities of 91 percent of all the key decision makers in PO&E R&D over that time period were measured, and most were interviewed in-depth as well. Various R&D performance metrics were also gathered over the same ten-year time period.
Raising the creativity of the entire organizational culture was also achieved by quickly bringing in more creative individuals as key decision makers in the organization - both scientists and managers. The average Creativity Index for the group of top managers and scientists rose from being substantially below the national average, to substantially above the average in less than four years.
The Polyolefin and Elastomers Business was also extraordinarily focused in its approach towards innovating between 1991 and 2001. This was not a case of "unleashing the creative child within." They focused their creativity on understanding key customer requirements, and the cost performance that they would need to achieve so that their customers would receive outstanding value. In short, the efforts of the creative yet often difficult-to-manage Starters, were directed and focused on key money-making projects, by top management. When needed, this direction was provided autocratically: Starters were not allowed to work in an out-of-control manner, on whatever felt good at the time to them.
The results in organizational effectiveness resulting from these changes are impressive. Various R&D performance metrics were measured for 1991, 1995 and 2001. Since 1991 the number of patents has increased four times. The overall efficiency of pilot plants has increased 18 fold. The efficiency of personnel handling technical service has increased 2.6 times, freeing up a small army of 133 individuals for more productive roles, including innovation.
Since 1991, there have been 16 major new product-line launches, where there had been none for many years prior. A steady stream of new product launches occurred , not only including major product innovations in polyethylene, but also in polypropylene, PET, elastomers and fibers. The percent of sales from products less than five years old had increased from 2.5 percent to 14 percent, a remarkable transformation in a business that today produces over 20 billion pounds of product. Even the capacity of existing plants has been increased by a factor of two-and-a-half times. Sales of new products have also helped to boost sales of existing products in the portfolio.
Increasing Stockholder Value
The first large increase in value from the breakthrough innovations from PO&E R&D came from the equity gained by Dow Chemical in 1996 as a result the DuPont-Dow JV in elastomers, which added over $0.5 billion to the share-holder equity of Dow Chemical per their annual report. By 2003, over six times the $0.5 billion in value from the DuPont-Dow Joint Venture in elastomers has already been created. The value created is conservatively projected to more than double again within the next three years. The Polyolefins and Elastomers Business now represents a significant percentage of the total value of The Dow Chemical Company, and is once again a crown jewel.
That's not too bad, coming from a commodity business which prior to 1991 was being considered for divestiture, and which itself believed there was little that could be done to create value from new products in polyethylene and elastomers.
Helpful for other corporations
The breakthrough approach that the Dow Polyolefins and Elastomers Business developed over the last 10 years is one of the most deliberate and rapid cultural transformations ever documented. By comparison, it took Jack Welch over 20 years by his own reckoning to get GE 50-60 percent of the way towards being more innovative and agile.
The approach is is relatively simple, highly effective and straightforward to implement:
| • | First, assess the fit of the personalities of your key employees to ensure that Starters and Finishers are in the right job roles. Adjust their job roles to fit their personalities as needed. (Don't waste your time trying to change their personalities, because these are determined to a large degree by genetics!) |
| • | Then, modify the group culture as needed. For example, bring in more creative types of decision makers when more innovation is needed. |
| • | Finally, use a structured but non-linear new business development process to ensure that the groups' creativity is focused on things that will bring value to your potential customers. |
This approach could help many organizations - as it did Dow's Polyolefins and Elastomers Business -reinvigorate their new product development efforts and thus, strengthen corporate profits and success.
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