(Financial) Crisis Response

Business Week features a book excerpt from management advisor Ram Charan describing how former DuPont CEO Charles Holliday, who turned over the CEO role to Ellen Kullman on Jan. 1, activated a crisis management plan once the impact of the financial meltdown became clear in early October.

Within 10 days of the crisis plan's creation, every employee in DuPont had a face-to-face meeting with a manager who explained what the company needed to accomplish. Employees were asked to identify three things they could do immediately to help conserve cash and reduce costs.... The actions aimed at conserving cash took hold quickly. Travel was curtailed sharply, internal meetings were canceled, and consultants and contractors were eliminated where possible.

Yet Holliday felt people still didn't grasp the urgency with which they needed to be acting. "In hindsight, maybe we were too good at giving them the reassurance and confidence that we could come through this," Holliday says. "We gave them so much confidence that they just weren't responding as fast as the slowdown demanded."

Together with his chief operating officer and chief financial officer, Holliday took the time to spend an hour and a half with each of the company's top 14 leaders. They were asked to explain what they were doing to cope with the crisis. They all brought long lists, and it seemed they were doing a lot. But the problem was how fast it was getting done. "They were talking about things that would be implemented by January or February, but they were things we needed implemented in October," Holliday says. So Holliday and his senior team assigned the executive vice-presidents sharply revised targets for cost, working capital, and other metrics for the rest of 2008 as well as the first quarter of 2009.

Dow Chemical recently reported that it has been operating under "Company Code Red" during the fourth quarter.  Will these crisis management efforts mitigate the impact of the global financial meltdown for industry? We should start getting some answers over the next few weeks as companies release fourth-quarter earnings and address the 2009 outlook. DuPont reports on January 27.