Renewing the Value of a Leader

After setbacks and what seemed to be a particularly high bump in the road, Calgon Carbon Corp. took down its "for sale" sign, an attempt at trying alternative avenues to restore shareholder value, and welcomed a new president and chief executive officer (CEO). Although modest enough not to call himself much more than his title implies, a leader he is, and certainly a savior to a company in need. Following troubled times, Jim Cederna was called upon to help transform Calgon into the prosperous venture that it once was.

A long-time member of the chemical and water industries and a well-experienced CEO, Cederna, having much experience with turnarounds, came to Calgon to help improve the company's worth after a period in which it had not seen its value increase. Prior to joining Calgon, he was president of Arizona Chemical, an officer of International Paper Co., and president and chief operating officer of Columbian Chemicals. Cederna also spent 20 years at Dow Chemical Co. in research, commercial development, sales and general management responsiblities related to specialty chemicals and high performance polymers including water purification systems. With his ideas for employee benefits, technology, customer service and a global vision, he remains a key player in getting Calgon back on track.The following is an interview with Cederna concerning the future of Calgon.

Water Quality Products What are your company's goals and strategic plan?
Jim Cederna We are working very hard at renewing our value as a leader. We are moving toward becoming more of a service company. And what does that mean? It means we are trying to grow our business, based on our reputation of being a proven, reliable problem solver. I have been amazed at what a tremendous positive goodwill we have in the industry. We are not perfect, but most companies know us as the guy that delivers results.

WQP Part of your changes involve the relocation of the company's Lakeland and Ontario plants. How will relocating these plants strengthen the company?
Cederna We are forming worldwide "Centers of Excellence" including one in Pittsburgh where those people are being located to, mainly people with design, engineering and application expertise. We didn't do very much manufacturing at either location, but we do in Pittsburgh. So, rather than having skilled employees in three locations, we will bring them together to find customer solutions, getting us a net result of all the synergy, interplay and technology expertise in one location. What that means for our customers is faster and improved answers because we will progress our technology even faster.

WQP How many staff were let go due to the relocation?
Cederna It is really too early to speculate. It is not known because we don't know how many people will choose not to move.WQP What level of economy do these international centers of excellence have? Cederna We're evolving to it being much more centralized and that's because the world is becoming much more global and the technology moves so fast. The sharing of technology and knowledge within our company is very integrated. We have a new information system that allows us to do that, too. Obviously you have to have a way to move the information around, and that's something that came online about a year ago, and we spent a lot of time this year increasing its capability, and we're going to be doing more with it to allow us to move that information-in essence becoming a virtual company.

WQP Do you see your percentage of global growth changing?
Cederna We hope so. Well, for us with the technologies we have, we really look at the world as our marketplace, and we may have some opportunities for one technology more in one part of the world and for another technology more opportunity in another. And that's what we are focusing on. It's the overall growth we are shooting for.

WQP Do you have any specific plans for the commercial, industrial, municipal or residential sectors? Are you targeting any one of those in particular?
Cederna The answer is yes to all of them because those are all our most significant markets. And if we have a plan, again, it goes back to how do we get involved directly with our customers and solve their problems.

We really have an interesting portfolio of product technologies that can be used in those markets. What I mean by interesting is that we already have a lot of different product technologies, so it is not just one. Secondly, we have them at all stages in their life cycle. For example, we have some grades of carbon that are very old and used for a long time and continue to be used, and that is the good news. The bad news is that other companies have matched them and come at us from different parts of the world. At the same time, we have brand new products in our portfolio that are just being introduced now and, quite frankly, the technology is so good, the world isn't ready for it. We have carbons today that aren't being used yet simply because people can't assimilate that whole technology.

In the last few months, we launched a product for MTBE that no one is buying in mass quantities yet because they can't assimilate it yet. But it works, and there is no one else who can make it. There is one that is specific to lead and one for home water filters. In fact, that thing would grow enormously but at the moment they're not there yet because the world is still just thinking about taking chlorine out, and so we've got products that are basically waiting for the world to catch up.

For example, our ultraviolet light technology for disinfecting drinking water is way ahead of the current market. It is much more cost effective.

WQP Is that the certified product?
Cederna We're at the certified level and we're out now with all the laboratory data. We've got the data, the certification and a lot of people's interest, and now we have full-scale installations.

Another one, odor control, we have on our Phoenix unit that utilizes our new carbons called the Centaur. Installation of these is increasing but its still a matter of how long does it take people to assimilate that technology.

And, just to mention one more, we have the ISEP Unit based on ion exchange resin technology. We don't make the resins, but we build some systems that make the resins incredibly more effective. So we have installations in now that are being used for treating and chlorinating groundwater.

WQP With the ISEP unit, do you have a strategic partnership with any resin manufacturers in particular?
Cederna We're working with all of them. In various applications we do have special programs with some of the resin producers, and I hope to do more of that.

WQP Where do you see the greatest potential in growth between the municipal and industrial markets?
Cederna More so in the industrial because they move faster to adopt technology.

WQP We imagine the selling cycle is a little shorter on the industrial side as well.
Cederna Sure, the cycle time is shorter because they can convert a little bit quicker and the industrial side is under a lot more pressure these days. Customers have to manage their costs and pricing, and they need to manage in the most cost-effective way, so they want the products as quickly as they can get them.

WQP How do you see the commercial and industrial sides growing, and in which applications do you see the biggest growth?
Cederna Municipal I expect would pick up in Asia now that their economy is coming back, so some of it is driven by economy. It's hard to separate those in terms of which will grow faster. With residential, it's pretty clear for me to see, I think it will see double-digit growth. The other markets will probably see nice growth, but with different drivers.

WQP With all of this talk about cutting-edge technology, what do you attribute the five percent cost increase for activated carbons?
Cederna That was an average price increase, and it's attributed to a number of things. We have the technology investment, but our activated carbon prices have lagged other costs to make these products such as raw material and energy costs that haven't been covered in pricing.

WQP Has increased competition from overseas had much of an impact as far as the amount of business (with the price increase combined with it)?
Cederna In some cases the overseas competition has grown and it's had an impact on some of those markets, mostly on pricing. In many of the markets, no it hasn't because our technology is unique-we are selling the whole package (replacing old carbon with new and regenerating the old) to the customer. It doesn't end with the sale, and so it's very difficult for overseas companies to compete with that.

WQP You have mentioned several times that the world is not ready for some of your products, where specifically does the United Stated fit into that category?
Cederna It varies. The United States has moved much slower on activated carbon than Europe. There continues to be discussion about how some of the regulations in the states are going to continue to be implemented so in that case I'd put that United States behind. Ultraviolet I think is more prevalent in Europe also. Other technologies such as ISEP are used more often in the United States. Then there are other applications in Asia that are way ahead. One of our strengths is that if the world starts picking up on a certain technology, we can put our employees in the Centers of Excellence to work on that particular one.

WQP Is it correct then to say that employees are cross-trained?
Cederna A lot of our employees, particularly on the applications side, are very knowledgeable to the customer's use and how to apply all of our technologies. And, obviously, some people have much more expertise in one technology, but they typically work in tandem.

WQP How do you intend to reach your goal of renewing the value of a leader?
Cederna We talk about it with our investors and our customers. With our employees we've done a lot of significant and fundamental things to establish that message of renewing ourselves. We measure trust in teamwork. We have spent the majority of 1999 working on how we build trust in teamwork and as far as I'm concerned, it's an asset of a corporation to talk with shareholders, and it should be valued because it makes us a better partner with our customers.

All employees have gone through a program called Speak Truth to Employee Power (STEP). Employees have the power to renew our value, and the STEP program gives us the tools to use the entire brain and deal with the heart. Some people may start to say that it is a "soft side," but it isn't our soft side. This is very scientifically based and gives employees the techniques to use when faced with a problem. When they are faced with change and the emotions are starting to take over, they have tools to deal with that.

WQP Is there performance-based compensation?
Cederna Yes, I'll come to that in just a moment. When I came in I gave employees shares from me personally, so every employee is a shareholder, which indicates that we are all in this together. We now have a program in place where they can increase very easily their share ownership in the company. We will have a new compensation program in 2000 and that has the rewards much more lined with actions and results. The targets and budgets are now set and the compensation that would go along with that is all being put into place.

WQP What have your employee reactions been to these changes?
Cederna Fabulous, the people have been absolutely fabulous. They really enjoyed going through this, and we've created a vocabulary now through the company right down to the last operators and in many languages for all of our locations including the centers in Germany and Belgium. With one common language, it helps all of them communicate better.

WQP With all of these new initiatives and strategies already in action, how would you sum up your future plans?
Cederna We will continue to grow our value as a proven, reliable problem solver. By doing that globally, the world wins because water and air are cleaner and safer. We spent 1999 putting into place a lot of fundamentals. These fundamentals are really going to drive some pretty exciting changes within the company and during 2000.

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